UPDATE 1-Nippon Life to buy majority of MassMutual Japan unit for $980 mln

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* Deal is aimed at boosting Nippon’s bancassurance business

* Japanese life insurers are diversifying their sales channels (Adds details of deal and background)

TOKYO, March 2 (Reuters) - Nippon Life Insurance Co said on Friday it had agreed to buy an 85 percent stake in the domestic unit of U.S.-based MassMutual Financial Group for about 104.2 billion yen ($980 million) as it aims to boost its bancassurance sales.

The deal is part of the broader trend in the Japanese life insurance industry, which is diversifying sales channel beyond traditional door-knocking sales representatives.

Nippon Life, Japan’s biggest private-sector life insurer with $700 billion in assets, plans to pay for the stake with cash and expects the deal to be completed in May or June pending regulatory approval, it said in a statement.

The deal had been expected after reports last year that the companies were in talks.

MassMutual’s Japanese business has 2.8 trillion yen in assets and annual insurance premium revenue of 323 billion yen. It sells insurance products to wealthy individuals through banks and stock brokerages.

Nippon Life’s acquisition of the MassMutual unit comes as it tries to catch up with rivals in the bancassurance business, where Dai-ichi Life Holdings leads the market.

Japanese insurers have been hit by diminishing returns from investments in Japanese government bonds and other securities amid the Bank of Japan’s massive stimulus measures, prompting them to seek riskier but higher-yielding assets. ($1 = 106.0800 yen) (Reporting by Chang-Ran Kim and Taiga Uranaka Editing by Stephen Coates and Muralikumar Anantharaman)